In this, we asked our columnist Robert MacDonald CFP his thoughts on politics and the whole “in/out” Euro debate.
By Robert MacDonald
This is an odd question for me to try to answer. I write and talk about money, not politics. But at this time, it’s a question I hear quite often from clients. They want to know if I can shed any light on what’s likely to happen in the event of the UK voting either way. I’m as shocked as the next person by the often reprehensible behaviour of some of our elected politicians although thankfully I have the wisdom of Warren Buffet (omnipresent) in my being and keep coming back to him and the great insight from his professor and guru Benjamin Graham: “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” The same logic holds true for democracy. In the short term, how markets move and whom we elect depends on people casting ballots at the ballot box. The results we see represent nothing more than the collective feelings of all those humans — at that moment. At any given time we’re voting for stocks or a political party/political decision based on imperfect information
and a very complex set of mental and emotional biases. These are all things that make it incredibly difficult to reach a rational decision. But in the midst of all this angst about what to do or think right now, we can better navigate the messy short term by considering what we want to happen long term. In the long term, we know that markets and elections become the weighing machines that Mr. Graham described. They smooth out the extreme emotions of any one moment and reflect the underlying value of our bigger systems, capitalism and democracy. So we ought to take a step back from what’s happening right now and add some time to our outlook, say 15 to 20 years. We need to find a way to balance the emotion we’re feeling right now with what we’d like to see decades from now. I know that it makes a big difference when it comes to investing, and it stands to reason that it applies to politics, too. When Winston Churchill said, “Democracy is the worst form of government ever created by the mind of man, except for all the
others,” he could have been talking about investing in free capital markets, too. All of the fear and risk and volatility add up to the worst possible way to reach financial goals ever created — except for all the others. Still, our investing and electoral systems make more sense when we nudge ourselves into looking past short-term emotions and biases. In the short term, markets will continue to move, politics will continue to look like a circus (often evident in the House of Commons!) and we’ll continue to be human and make decisions based on how we feel. But in the long term, history has proved that both the markets and our political system will stretch and evolve to accommodate pretty much most of our feelings.
The views in this article are personal and provided for informational purposes only and should not be construed as recommendation by the publisher or investment advice by the contributor as laid down by the Financial Conduct authority.
T: 01475 638100 | www.macdonaldandco.com
“Bespoke Financial Planning for your Future” MacDonald & Co is a trading style of MacDonald & Co (Wealth Management) Ltd which is authortised and regulated by the Financial Conduct Authority
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